How Credit Card Jumping Affects Your Credit Rating

Credit card jumping (or rate surfing) is becoming more widespread as people struggle to keep on top of the mountains of debt they have amassed. It's called credit card jumping because people jump from card to card, taking advantage of the best deals on offer.

How Credit Card Jumping Works

It works like this. Suppose you pay for your new car, DVD recorder or stereo using your old card. After the interest free period of around 56 days (less on some cards) you will have to pay interest on the outstanding balance. This can range from under 8% to well over 23% depending on the card you have. And most of the money you pay back each month will pay off interest rather than reducing the principal.

Credit card jumping offers a solution. Most card companies offer reduced interest rates to new customers. This can be a long term low interest rate or a 0% interest rate for a period of up to 12 months. This means that during this period credit card customers are reducing the principal when they make repayments. This will help to reduce their overall indebtedness.

Shopping For A 0% Credit Card

To get a 0% card, consumers just need to shop around. They can visit one of the many comparison websites to find the best deal. Many card companies also offer other incentives such as money-off vouchers, cash back rewards and discounted insurance.

The 'jumping' part comes when the 0% offer runs out. Canny consumers will apply for a new card about a month before the old offer runs out. This leaves plenty of time to get the new card and transfer any balances on to it to take advantage of the new offer. Consumers can do this any number of times.

What About My Credit Rating?

The key to keeping a good credit rating is to always pay at least the minimum amount that is listed on the statement. This must also be paid on time and consumers should never exceed their credit limit. It is also important to keep the old cards even after the balance has moved to another card. Old cards show people's credit history and improve their credit rating.

How Companies Protect Against Card Jumpers

When 0% interest offers first appeared, credit card companies did not realise the implications. They lost hundreds of thousands of pounds of potential interest. Now there's a strategy in place to make card jumping less attractive. This is the balance transfer fee.

The balance transfer fee is a new charge imposed by credit card companies whenever consumers transfer a balance to a new card. The rate for this is around 2%. This means that card companies get their money up front. There are still some cards that do not charge a balance transfer fee, so it's worth shopping around while they last.

Banks Vs. Non-bank Credit Card Providers

Which should you choose?

When it comes to choosing a credit card, knowing what is right for you can be a really tough task.

For a start there are a dozens of banks that offer a whole range of credit card products that may suit your needs. But there are also a number of non-bank credit card providers. So how do you know which to go for?

A lot of people are quite wary of non-bank credit card providers as they don't get as much coverage in the media as banks. This is smart as not all credit card providers will offer the best products. However some are offering products that can be of great advantage to those in need of a credit card.

There are so many credit card providers in Australia that we couldn't possibly review them all, however we can narrow it down to banks and a select few non-bank credit card providers. At the credit card guide there are three non-bank credit card providers that we review.

The first that you may find The Credit Card Guide is the credit cards available from GE Money. GE Money offers a number of credit cards that are designed to suit different credit card spending habits and needs.

These credit cards include the Go MasterCard, eco MasterCard, Wizard Clear Advantage MasterCard, Low Rate MasterCard, and of course the GE Money MasterCard. All of these have been reviewed extensively and can be found at The Credit Card Guide website.

You'll also find the Woolworths Everyday Money Credit Card. This credit card's main objective is to provide credit to those in need, while promoting the sale of their products as well as that of their partner companies.

Rewards points are offered at a rate of up to three points per dollar when certain products are bought. Outlets include Woolworths and Safeway, Caltex, Big W, ePump, Thomas Dux, Woolworths/Safeway Liquor, Dan Murphys, BWS, Tandy and Dick Smiths.

If you have a Woolworths Everyday Rewards card you can link this to your Everyday Money credit card and use the two together to get maximum benefits while shopping and at the petrol pump.

We also review the Aussie MasterCard which comes very highly recommended for interest free credit cards and balance transfer credit cards. It's not often a non-bank credit card provider can offer a competitive credit card that isn't targeted to certain retail outlets or products, however the Aussie MasterCard does just that.

As a non-bank credit card provider it would be fair to say that Aussie is one of the best and is well worth checking out if you are in need of a good all round credit card.

So when it comes to the question of banks versus non-bank credit card providers, the question will always be asked, Can I trust this company?' But the key is to do your research. Compare interest rates and know exactly how much you can afford and what it is you need from your credit card.

You can find all the information you need about over 90 credit cards at The Credit Card Guide, so make your credit card choice easy by checking out The Credit Card Guide's no-nonsense credit card reviews now.